Are Credit Unions Better than National Banks in Car Financing?

August 26th, 2016 by

Credit Union VS. Bank

When it comes time to finance a used car purchase, you have choices, and two of those choices are to finance through a credit union or finance through a national bank. While there are advantages to both, more and more people are choosing to finance their car loan through a credit union because the advantages seem to far outweigh the advantages of financing through a large bank.

Let’s first make sure we understand the differences between a credit union and bank because many people have never dealt with a credit union. Credit unions are similar to traditional banks in that they offer financial services to customers like checking and savings accounts, CD (certificates of deposit), loans and credit cards. However, credit unions differ from large banks in the following ways:

Credit unions are not-for-profit financial institutions, and because they operate as non-profits, they typically offer higher interest rates on savings accounts and CD’s and lower interest rates on loans and credit cards.
Credit unions are more member-focused than banks because credit unions function as what is known as a “cooperative,” which means they are owned and operated by their members; banks, on the other hand, are controlled and operated by their stockholders. Your initial membership deposit in a credit union makes you part owner and gives you a voice in the decisions made by the credit union. Regardless of how much money you have in a bank, you don’t have any influence on its operation.
Let’s explore some of these advantages further.

Credit unions usually pay higher interest rates on all deposit accounts including savings accounts, money market accounts and checking accounts with rates varying anywhere from four to ten times the amount of interest you would receive from a commercial bank.

Lower APRs and Lower Fees
Credit unions also offer relatively low APR’s (annual percentage rate) on mortgages, personal loans, and credit cards.

Credit unions offer lower fees than commercial banks with many offering checks, withdrawals, and electronic transactions at no cost to you. Many credit unions also offer checking accounts with no minimum balance and no monthly account servicing charge, which could save you a lot of money each year. While credit unions do charge overdraft fees, they are typically lower than the fees charged by banks. Sometimes the difference can be as much as $10 or more, which certainly adds up over time.

Better Customer Relationships
Credit unions are more customer focused than banks and therefore tend to make and enforce policies that are in their customers’ best interest. Banks, more focused on making a profit, are not as concerned with how their decisions will affect their customers.

Along the lines of customer service, because credit unions typically have small branches, they can offer faster and more personal customer service. If you visit the same credit union location several times a month, you will find that the employees get to know you and provide more individualized attention to its members.
There are numerous differences between credit unions and banks, and many car dealerships work with both to offer car shoppers different options. Please ask your sales rep/finance team member about financing as you discuss buying a used vehicle.

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